Three Ideas for Charitable Deductions

The Tax Cuts and Jobs Act of 2017 (TJCA) made significant changes to how most people calculate their taxes, including a doubling of the standard deduction. One of the results of these changes is that a lot of people are under the impression that there are no longer any tax benefits given for charitable contributions. That isn’t true. Depending on your tax situation, it may be harder to reap some of these tax benefits, but many people will still qualify. For example, here are three strategies for charitable giving that you might be able to gain a tax benefit from:

  1. Qualified charitable distributions. If you’re age 70½ or older, you can transfer up to $100,000 (or a total of $200,000 for joint filers) directly from your IRA to a qualified charitable organization without paying any tax. Because distributions done this way are not subject to federal tax, it’s like contributing with pre-tax dollars. Plus your contribution counts as a required minimum distribution for tax purposes.
  2. Appreciated securities. Donate appreciated property (like securities) to a qualified charity and you can deduct the current fair market value (FMV) of the property if you’ve owned them longer than a year. For example, if you acquired stock three years ago for $7,500 and it’s now worth $10,000, you can donate it and deduct the entire $10,000 FMV if you itemize your deductions. There’s no capital gains tax on the $2,500 appreciation in value — ever! This is a great strategy if you are close to or over the itemized deduction threshold in a year.
  3. Bunching donations. Under the TCJA, the standard deduction was essentially doubled for 2018-2025, while certain itemized deductions were reduced or eliminated. As a result, it now makes sense to “bunch” large gifts of property, like securities (see #2), in a tax year in with which you expect to itemize. Conversely, if you don’t anticipate itemizing in the current tax year, you may postpone donations into the next year. The idea is to get the most tax deductions possible over a multiyear period.

With each of these strategies, it is essential to follow all the rules when donating. If you don’t, your gift may not be deemed a qualified donation for tax purposes. If you would like help in planning your charitable giving, please contact our office. We would be happy to review your situation.

This article carries no official authority, and its contents should not be acted upon without professional advice. For more information about this topic, please contact our office.

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